Germany drawing up plans for Greece to leave the euro

Discussion in 'Europe and Russia' started by pmaitra, Feb 19, 2012.

  1. pmaitra

    pmaitra Moderator Moderator

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    Germany drawing up plans for Greece to leave the euro

    By Bruno Waterfield, Brussels8:16PM GMT 18 Feb 2012
    Telegraph UK


    Plans for Greece to default, potentially leaving the euro, have been drafted in Germany as the European Union begins to face up to the fact that Greek debt is spiralling out of control - with or without a second bailout.

    The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.

    Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country's finances in order.

    But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.

    His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.

    "He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he - and a growing group - are convinced it will not pull Greece out the hole," said a eurozone official.

    "The idea instead is that the Greek government should officially declare itself bankrupt and begin negotiating an even bigger cut with its creditors. For Schäuble, it is more a question of when, not if."

    The German finance minister's comments are certain to plunge the authorities in Athens into even deeper gloom. On Saturday they tried to sound optimistic, with a cabinet meeting to thrash out the final details of an austerity package.

    The cuts, including a reduction in the minimum wage, mass redundancies within the public sector, and a slashing of the health and defence budgets, sparked rage on the streets of Athens last week, with buildings set on fire amid angry protests.

    But the country's politicians are resolutely trying to sound upbeat. "The Greek people have done everything they can and we are determined to make good on our commitments," said Christos Papoutsis, public order minister.

    The French prime minister, Francois Fillon, lent his support to the embattled Greeks when he cautioned last week that Europe should not "play with the default of Greece" and must now play its part.

    "The Greeks have promised very important reforms," he told RTL radio. "The Europeans now have to keep their commitments."

    With Greek morale at rock bottom, the national mood darkened yet further after armed thieves looted a museum on Friday in Olympia, birthplace of the Olympic Games, and stole bronze and pottery artefacts - just weeks after the country's National Gallery was burgled.

    One Greek newspaper suggested the state could no longer properly look after the nation's immense cultural heritage. "The Greek state has gone bankrupt, let's face it," the conservative daily Kathimerini said in an editorial.

    "If the state cannot guard the country's great cultural heritage for financial or other reasons it must find other ways to do it."

    Mr Schäuble's pessimism will not be welcomed in Athens. The hugely influential German politician's doubts have been growing for several weeks, and prompted angry exchanges when Greece accused Germany of trying to drive it out of the euro.

    His scepticism is not yet fully shared by Angela Merkel, who is said still to be determined to prevent Greece's financial collapse. "She thinks Greece going bust could cause a shock wave that buries other countries - with Spain and Italy among them. It could break apart the entire monetary union," said an official.

    But it has support from Austria and Finland - holding the prospect that a eurozone meeting tomorrow will fail to agree the next set of EU-IMF payments for Greece.

    Greece must service €14.5 billion of debt on March 20 and, before EU-IMF cash can flow into its accounts, persuade private creditors of the country, mainly banks, insurance companies and funds, to give up on 70 per cent of their claims.

    "The private sector involvement takes at least four weeks to issue the prospectus and to get subscribers, and without a deal on Monday then time will run out in March," said an EU diplomat.

    Rumours are already circulating in Wall Street that banks are preparing for a "credit event" - a technical term used by credit agencies to mean a default - in the days immediately following March 20, as Greece looks likely to be unable to meet its debts.

    The sense that an endgame is approaching has been fuelled by the secret "troika" report, by EU, IMF and ECB officials on Greek debt "sustainability".

    It found that even if Greece implemented all the austerity measures expected of it, and if it achieves highly optimistic economic growth targets, it will still fall short of what is needed, with debt likely to total 129 per cent of GDP in 2020.

    But the European Central Bank and the Eucopean Commission are, for now, lining up with Mrs Merkel to push for the rescue attempt to continue, fearful that the financial tsunami that would be unleashed if it failed would swamp the eurozone.

    Mr Schäuble maintains that since Greece is already regarded by the financial world as bankrupt, a formal bankruptcy would have no negative consequences for other euro members.

    Source: Germany drawing up plans for Greece to leave the euro - Telegraph
     
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  3. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    The plan to break the dollar failed miserably leaving half of europe bankrupt. I hope NATO will
    be able to stay intact.
     
  4. Iamanidiot

    Iamanidiot Elite Member Elite Member

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    If greece will be booted out of EU will it not mean that EU is a failure?.Tomorrow it may be portugal or Italy in the same scenario
     
  5. Tshering22

    Tshering22 Sikkimese Saber Senior Member

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    It was a mistake to admit such countries into EU in first place. East Europe was never ready and nor was Mediterranean. Portugal and Ireland are exceptions. They just fell out for no reason.

    In fact, I am wondering why did Greece leave Drachma. They were pretty well off with the Drachma running.

    EU itself has failed as a Union with only France and Germany saving the entire Union. Remaining members are a deadweight.
     
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  6. methos

    methos Regular Member

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    With the exception that during the Ninties it was 1 $ = 1.8 DM, 1 DM = ~3 Franc etc. Now a € is worth more than a $ and has less inflation than the DM.

    AFAIK Greece never fullfilled the requirements to join the Eurozone, but they used faked datas and therefore were capable of using the Euro.
     
  7. Godless-Kafir

    Godless-Kafir DFI Buddha Senior Member

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    This source is from UK i dont trust any jingo bullshit draining out of the gutter they call British media. We all know how the MRCA was portrayed, i seriously think British private media is as bad as the one in Iran or China.
     
  8. methos

    methos Regular Member

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    Seems like you are right. I just watch a ~30 min excerpt of the speech which the German financial minsiter Schäuble hold at a "10 years Euro" festival. He never mentioned that Greece should leave the Eurozone, all he said is that the current position is that Greece's debt should be lowered to only 120% of the GDP to 2020.
     
  9. Godless-Kafir

    Godless-Kafir DFI Buddha Senior Member

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    They will say anything to get a few eye balls that will keep those dieing news papers alive. British media is biased to the core on a lot of issue and one of it being the Euro. Some how american media is less biased barring Fox to some extent.
     
  10. LETHALFORCE

    LETHALFORCE Moderator Moderator

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    If Greece is booted out then why would other problem countries remain??
    The PIGS are blamed for the EU economic crisis but they are leaving out
    other nations that should be included with the PIGS like UK.
     

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